absolutideas

Please stay cautious, it’s not that easy..

written by Doug French

“For those thinking that the real-estate bust is all over with — think again. The residential market has hit the ditch and continues to sink lower, but now the commercial property market is rolling over and will take many lenders down the drain with it. America’s small and regional bankers are pointing their fingers at the big banks, claiming the big money center banks “have tarred and feathered us,” City National Bank chief executive Bill McQuillan told the Wall Street Journal during the Independent Community Bankers of America convention in Phoenix. But banks — large and small — all over the country are loaded with commercial real-estate loans, and that collateral is heading south according to a Deutsche Bank report.

The folks at Deutsche Bank see price declines of 35 to 45 percent and maybe more in commercial property, due to the large number of loans coming due between now and 2012 that will not be able to be refinanced. Not only are loan delinquency rates up and rents down, but the go-go years of aggressive loan underwriting are gone.

….

But no area of commercial property will be spared the bloodbath. Hotels are imploding according to Miller and cap rates for retail properties have jumped 250–300 basis points in a year, while office cap rates have increased 200 basis points. These cap-rate increases translate to property value decreases of a quarter to a third, and the market is just starting to deteriorate. This property meltdown will “make the 1980s look like a picnic,” Miller says.”

read full article here Mises.org blog

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